Saudi Arabia has been in the news a lot lately. It was in the oil-rich kingdom that President Donald Trump started his Middle East trip and it was in the country’s capital, Riyadh, that the president urged the Muslim nations to unite against terrorism.
But as the president condemned Iran for its sponsorship of terrorism, vowing to stand by our ally, Saudi Arabia, not one mention of the human rights abuses perpetrated by the Saudi kingdom was uttered. The president was also mum about the kingdom’s well-documented support for terrorism.
But even more importantly, the president failed to mention what has, over the years, kept the United States and the Saudi kingdom so closely connected. As a man who prides himself on being a nationalist, he should know that this relationship has disproportionately helped the Saudis while all the U.S. has gotten in return is that the oil-rich nation and Organization of the Petroleum Exporting Countries (OPEC) member continues to sell its petroleum in dollars.
In a 2014 piece, the founder and president of the Carl Menger Center Paul-Martin Foss explained that President Richard Nixon’s 1971 decision to cancel the convertibility of the U.S. dollar to gold brought the president to the Saudi kingdom for a very important meeting.
During his stay, Nixon and the House of Saud struck a deal, making the Middle East nation the “anchor of the petrodollar system.” For as long as Saudi Arabia would make its deals in dollars, America would promise to protect the nation militarily.
As it turned out, Nixon appears to have been afraid that closing the gold window would devalue the dollar — and he was right! But he figured that as long as the dollar was being used by nations purchasing and selling oil internationally, its core value would remain strong. With this deal, Nixon guaranteed America would continue experimenting with inflation without care while giving Saudi Arabia a strong military ally.
Fast forward to 2017: As Trump stands before the Saudi kingdom and the press, telling them how devoted he is to remain their partner, he promises to cut taxes like never before at home while increasing defense spending.
Will Trump, or any other president for that matter, ever recognize Nixon’s deal as the very reason why the U.S. remains blindly devoted to a country with such a terrible reputation? Probably not. Is it shameful that mainstream news outlets never report on this obscure piece of history? You bet.